A couple of weeks ago, I published an article which suggested that — based on RAC forecasts — petrol and diesel prices were likely to fall.
The latest figures show that the RAC’s forecast was right. The average price of petrol and diesel fell in November, thanks to supermarket price cuts which other retailers were forced to follow. The average price of petrol last month fell by 2.9p to 113.96p, while diesel dropped 2.4p to 116.37p per litre.
However, the outlook has changed since 30 November, when the oil producers cartel agreed to cut oil production in order to boost oil prices and hopefully replenish their emptied coffers. It’s a major u-turn for OPEC, which for the last two years has stuck maintained a policy of pumping as much oil as possible in the hope of putting competitors out of business.
OPEC’s decision has caused the cost of a barrel of Brent crude oil to rise by 13% from $46 to more than $55 in less than a week. Such a sharp rise in oil costs is likely to result in an increase in petrol and diesel prices. However, the RAC Fuel Watch price forecast currently suggests no change is likely in the next week or so.
One reason for this is that there’s no guarantee that the oil price will hold onto the gains made during the last week. The oil market remains oversupplied with oil. With OPEC production cuts not due to take effect until January, we don’t yet know whether all OPEC members will stick to their agreed production limits. Nor do we know if US oil production from fracking will rise in response to higher oil prices.
It’s also worth remembering that the price of oil isn’t the only factor that affects fuel prices. The sterling/US dollar exchange rate also has an impact, as RAC spokesman Simon Williams explains:
“Drivers should remember that while the oil price is the biggest variable affecting fuel prices, it is not the only one. With fuel traded in dollars, the dollar/sterling exchange rate also has a bearing on what retailers pay, and in turn what we pay when we fill up.
“A weaker pound, as we have seen since the EU vote, can see forecourt prices rise but a stronger pound can do the reverse. The unprecedented political situation on both sides of the Atlantic has the potential to buffet the exchange rate significantly through next year.”
In the meantime, you can always find the cheapest petrol and diesel in your area using our Petrol Prices page. Just find your location on the map and check for the cheapest price. Don’t forget to update the map with the latest prices yourself — doing this is quick, simple and FREE, but the system won’t work without your help. Thank you!